While there was speculation late last week about the possibility of Morrisons snapping up online operator Ocado, I can’t imagine two companies that would make more of an odd couple.
While the UK grocery industry has been murmuring for a number of years that Morrisons is desperately in need of an online offer, and Ocado is an online-only grocer yet to make a profit, the synergies between the two companies pretty much end there.
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Morrisons is largely considered a “financially conservative” company that takes its time before enacting change. For example, while Ocado has been operating online since 2001, Morrisons announced in September this year that it will begin trialling a number of online models in 2011, which means that Morrisons will only be dipping its toe in the channel a full decade behind Ocado.
At the time of the announcement, Morrisons CEO Dalton Philips said the company is “not in the business of losing money” and would only move online if it could do it profitably.
Compare this with Ocado CEO Tim Steiner, whose company is yet to make a profit, vigirously claiming alongside the company’s disappointing IPO launch in July that “in ten years from now, we will be living in the future, not in the past”, attempting to describe the company as on par with Amazon and Apple.
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While just-food largely admires Ocado’s continually innovating offer and strong customer service, the jury will remain out on whether Steiner is a visionary in the league of Apple’s Steve Jobs until the company turns a profit.
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By GlobalDataIn terms of their outlooks, Morrisons is the the reliable family car of retail, while Ocado is a sporty convertible, fast, but liable to leak in heavy rain.
Similar disparities also face the two retailers’ consumer profiles. Morrisons trades heavily on its northern heritage, UK sourcing, value and family focus. Meanwhile, Ocado is largely upmarket retailer Waitrose’s online presence with a premium range, and a customer-base largely inside the M25 and South East.
To continue with these hackneyed clichés, the perception of Morrisons’ consumer is more family roast dinner compared with Ocado’s beef carpaccio.
Ocado’s sourcing deal with Waitrose depends on the online retailer not being owned by one of Waitrose’s rivals. In effect, therefore, a purchase by Morrisons would largely mean it would be buying Ocado’s infrastructure, and presence in the South East (where it is weaker) rather than its customer base, who would migrate towards Waitrose Direct as they would no longer be able to purchase Waitrose’s products.
Morrisons missing out on first-mover advantage by waiting so long to roll out online grocery might not be such a bad thing, allowing it to cherry pick the best of what its competitors have rolled out over the past decade.
However, cherry picking one of the industry’s more controversial operators, seems, at least to me, too much of an odd couple to become a happy marriage.
